Post Doha failure, playing the blame game

Updated: Jul 31 2006, 05:30am hrs
The Doha Round failure was expected, notwithstanding efforts to break the deadlock. It was no surprise that the talks fell prey to the issue of agricultural subsidies. However, what is interesting is the blame game that has dominated the aftermath of this collapse. More time has been expended in finger-pointing than in analysing what this means for the world trading system. While accusations and grandstanding have always characterised WTO negotiations, this time the blame game has been pointed and openly reflective of divisions between the US and the EU.

The US is pointing the finger at the EU and developing countries for not providing enhanced market access. In its view, any reforms it commits on trade-distorting agricultural subsidies have to be coupled with substantive reduction commitments by the EU and with commercially meaningful market access commitments by major developing countries across sectors. Further, it blames the EU for applying non-tariff measures on US agri-exports. The US is also criticising India and China for limiting genuine market access to their countries, insisting they cut tariffs on farm products by 55%. Underlying this finger-pointing are the interests of the US agricultural lobby and pre-poll attempts at votes.The EU, meanwhile, is pointing fingers at the US for being inflexible on farm subsidy cuts. It claims that it is willing to lower subsidies by as much as 75%, provided the US also takes a significant step in this direction.

The developing world is blaming the US and the EU for holding out on a deal that could have advanced the cause of development. They point out that they have got little credit for autonomous liberalisation and have instead been pressured to bring down tariffs further in agriculture and industry, and to open up sensitive services. While developing countries had sought a 75% cut in farm subsidies, the US was willing to cut by only 53%. Moreover, developing countries note that non-tariff measures undermine market access commitments by developed countries. Their finger-pointing is directed more at the US this time.

Hence, a game is being played out, which involves the US, EU and developing countries. Each wants the others to make the first and more significant move, in the process ending up with a no move equilibrium. Is this a sub-optimal equilibrium

In the case of India, it can be argued that the failure of the talks may not be a serious blow, especially if one acknowledges that our interests are not completely aligned with those of key members in its alliance. While reduction in agricultural subsidies would enable poor farmers in the developing world to get more remunerative prices for their products, this need not translate into greater market access for Indian agricultural exports, especially given Indias relative disadvantages in this sector. Subsidised food imports may help India address food security concerns and contain import costs, as suggested recently.

US accusing EU, developing nations for not providing enhanced market access
EU, in turn, accusing the US for not being flexible on farm subsidy cuts
Developing nations blaming US, EU of scuttling a deal beneficial for them
Moreover, it is unlikely that non-tariff barriers affecting Indias agricultural exports would have been addressed through these negotiations. India, clearly, also has defensive interests in agriculture. In short, the gains in agriculture cannot be unambiguously established for India. In industry, these negotiations were unlikely to tackle non-tariff measures and misuse of anti-dumping provisions, important market access concerns for India.

And finally in services, there was little progress in modes 1 and 4, Indias main areas of interest, despite a significantly improved revised offer. Indias Comprehensive Economic Cooperation Agreement with Singapore, in contrast, has been able to do far more on mode 4, an experience likely to guide its prospective agreements with other countries.

Thus, the WTO talks might not have yielded much for India. The price could have been too high to be politically acceptable. The blame-game allows India to avoid a situation where it would have been criticised within the country for succumbing to external pressure, and outside the country for scuttling the round. With so many fingers being pointed, and especially at the US, India can emerge as having held on to the interests of the developing world.

The writer is a professor, economics and social sciences area, IIM Bangalore